It's too risky - let's just stick to what we do well (or am comfortable with)
Heard that before? Of course. It is a common reason tossed out almost reflexively for why companies resist aggressively exporting. But how valid is it? Is there meat to the argument? Is it merely an irrational concern? And against what benchmark is that potential risk measured?
I'll give you a hint.....it's a lame rationalization. A couple caveats. First, this isn't intended as a critique of anyone who has used it. It is commonly accepted (albeit wildly wrong.) Second, if your particular product could only be exported to the "Horn of Africa" for instance (or some area of comparable lawlessness and instability,) then certainly the concern is justified. But in general it is wildly fallacious.
How well is that working for you
One valid reason why a company could very well decide not to export was that the potential market (vast and profitable) and competitive landscape (none currently or foreseeable) and rate of growth (rapidly trending upward) in the domestic US market creates such a compelling opportunity and so taxes the company's resources, that to export would dilute the potential business value of the domestic market.
If your business fits these parameters, then frankly you are wasting your time here. I am pleased to count you among the readers of this blog, but you can create more value by spending your time elsewhere. HOWEVER, if you think your business fits those parameters I'd suggest that you have a serious conversation with your sales team; that you ask your finance folks to be brutally honest (and seek consult from outside resources) and bounce your hypothesis of executive friends of yours from other companies.
Guess what - your business is vulnerable. Many companies face stagnating domestic markets, brutal competition, dwindling revenue and profit growth and probably even pressure from bankers/investors as loan covenants and growth targets appear to be in jeopardy. (If you believe the status-quo reduces risk, go back and read this recent post, and then pick up the book Switch. You are letting your elephant and rider run wild.)
So if your current focus is exclusively (or nearly so) on your domestic market you are CREATING RISK yourself rather than avoiding it.
The Devil you know
Sometimes folks recoil at the perceived risks associated with export (nearly all can be mitigated) and assume that the only substantial risk they run locally is credit risk on their receivables. But this creates a really distorted view of the relative risk profile of your different markets. In fact it incorrectly correlates familiarity with reduced risk.
A great example of less obvious risks in our domestic market is the regulatory and political risk (and to some extent the FX, or exchange rate, risk that derives from those two.)
Dallas Fed President Richard Fisher recently said the following: “I have spoken to this many times in public. Those with the capacity to hire American workers―small businesses as well as large, publicly traded or private―are immobilized. Not because they lack entrepreneurial zeal or do not wish to grow; not because they can’t access cheap and available credit. Rather, they simply cannot budget or manage for the uncertainty of fiscal and regulatory policy. In an environment where they are already uncertain of potential growth in demand for their goods and services and have yet to see a significant pickup in top-line revenue, there is palpable angst surrounding the cost of doing business. According to my business contacts, the opera buffa of the debt ceiling negotiations compounded this uncertainty, leaving business decision makers frozen in their tracks."
Now, if we can be apolitical in our reaction - he is right. There is huge political risk in the US market right now. More than in many export markets.
A quick recap:
- market here is stagnating
- risk here is high
- tools exist to mitigate risks in export markets
...And you are really too flummoxed by exporting uncertainties to take a serious look at how it can benefit your business?
I didn't think so
The bottom line is that risks abound - those which are unfamiliar feel daunting, or even overwhelming, while those which are too familiar become easy to ignore. A strategically planned, globally diversified business model is a sensible approach to mitigating both types.